How to Lower or Limit Tax When Selling a Silicon Valley Home

By
Real Estate Agent with Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty DRE# 00901962 Lic.1985
https://activerain.com/droplet/5j4G

How to Lower or Limit Tax When Selling a Silicon Valley Home

 

Luxury home image

It’s human nature to pay as little as possible for a desired item, especially when it comes to paying taxes on the sale of real estate, whether a home or investment property.

 

On every estimated seller net sheet I provide, there is an important disclosure at the bottom of the page. “*Estimate is based on reliable information and data but is not guaranteed. Principals to verify tax and legal consequences of buying and selling Real Estate prior to signing a contract.”

 

As of April 18, 2019, my understanding of the real estate tax law still shows the following benefits below are valid and available to Santa Clara County home sellers in California.

 

Primary Residence Benefits

 

1 U.S. Citizen Capital Gains Benefit

 

A Seller can keep up to $250,000 per person and up to $500,000 per married couple tax-free when selling a primary residence that was lived in by the principal(s) for at least 2 years (or any 24 months) of the past 5 years (or past 60 months).

 

This Benefit can currently be used repeatedly in sequence. For example, if a qualifying couple lived in a home from January 1, 2015 to January 1, 2017 and sold that home in January 2017 and kept up to $500,000 tax free, they could repeat the process as early as two years later in January 2019. However, the property may not have gained the full $500,000 in such a short time.

 

Again, the couple must qualify by living in the property for at least 24 of the past 60 months as their primary residence. Tax records should reflect these facts, should there later be an audit.

 

2 California Senior Transfer Tax Basis Benefit

Courtesy of Propositions 60 and 90, Seniors over age 55 can sell a primary residence and transfer that low tax basis to another primary residence located within Santa Clara County or any of the current 10 participating counties in California. Participating counties are: Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolemne and Ventura.

 

There are certain restrictions, such as this can only be used once in a person’s lifetime. There is a fee of $110 for the transfer. To get questions answered, call 408-299-5300.

 

Investment Property Benefits

 

1 Tax-Deferred 1031 Exchange

In a Tax-Deferred 1031 Exchange an investment property may be sold for a like-kind property (e.g. real estate for real estate) and the taxes deferred until the property is sold or upon death of the principals.

 

There are special caveats. In addition to the traditional escrow company, there must also be an exchange company that holds all of the sale proceeds, proving (in case of any audit) that the seller never “touched” any of the money.

 

Also the Seller only has 45 days from closing of the sale to notify and identify in writing their intent to purchase 1 of 3 properties. Only 3 possible properties may be identified. Should Seller fail to purchase one of the 3 identified properties, the exchange is “dead” and taxes are due.

 

There are additional tax-deferring or sometimes tax-eliminating instruments that tax, investment and financial planning companies promote. Those include:

 

Installment Sale

Installment Sale Trust

Charitable Remainder Trust

Loan on Proceeds

Exchanges into Opportunity Zone Property

 

Any person considering buying, selling or investing in real estate is advised to consult tax and legal professionals to determine the financial impact of any real estate transaction, as well as the use of any of the abovementioned tax vehicles or strategies for their exact situation.

 

Many tax and legal professionals will provide a free 30-minute consultation when requested in advance. To maximize the efficiency of the consultation time, principals are advised to prepare a synopsis of their current situation and what action(s) they are considering.

 

Helpful tax publications:

 

IRS Publication Tax Topic 701 Sale of Your Home

IRS Publication 523 Selling Your Home

IRS Publication Like-Kind Definition

IRS Publication Like-Kind Exchanges Form 8824

 

IRS Publication Tax Topic 537 Installment Sales

IRS Publication Installment Sales

IRS Publication Opportunity Zones Frequently Asked Questions

 

California Specific Benefits

California State Board of Equalization Answers on Proposition 60 and 90

https://www.boe.ca.gov/proptaxes/prop60-90_55over.htm

 

Proposition 60 for Seniors (age 55+) selling and buying in Santa Clara County

https://www.boe.ca.gov/proptaxes/prop60-90_55over.htm

 

Proposition 90 for Seniors (age 55+) selling and buying in the 10 Participating Counties in California

 

Which California Counties Accept Proposition 60 and 90 tax transfers

https://www.boe.ca.gov/proptaxes/pdf/95_34.pdf

 

Senior Tax Basis Transfer Form

 

Frequently Asked Questions about Propositions 60 and 90

 

Thanks for reading “How to Lower or Limit Tax When Selling a Silicon Valley Home”.

 

 

 

 

 

 

 

 

 

 

 

 

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Aloha & God Bless You, 

Michelle Carr Crowe Just Call 408-252-8900 sign image

 

Michelle Carr Crowe of the Get Results Team Real Estate Agent . Author . Coach . Trainer DRE #00901962 Licensed to Sell since 1985

P: Just Call ... 408-252-8900
F: 408-947-1585
E: GetResultsTeam@gmail.com
1190 S. Bascom Ave., Suite #118
San Jose, CA 95128
www.MichelleJudyCarr.com

Michelle C. Carr-Crowe and the Get Results Team (established by the late legendary Silicon Valley super agent Judy Carr) are known as the "Lynbrook and Cupertino Schools Experts." Coaching clients to success is Michelle's passion, making her and her team creative catalysts for positive change in people's lives. She is a Silicon Valley-based multi-million dollar real estate consultant, author, coach and trainer who works by referral only.

Her designations have included: Accredited Buyers Representative (ABR), Accredited Consultant of Real Estate (ACRE), Accredited Luxury Home Specialist (ALHS)Accredited Staging Professional (ASP)Certified Distressed Property Expert (CDPE),  Property Marketing Expert (PME), Real Estate CyberSpace Specialist (RECS), and Senior Real Estate Specialist (SRES).

Michelle is an internationally-published freelance writer with over 1,200 traditional articles in print and online, co-author of two books on Silicon Valley-specific real estate as well as over 68,000 blog posts on Blogger, ActiveRain, Examiner, FaceBook, Realtor, Trulia, RealBird and others. She enjoys reading, traveling, animals, nature, family, dancing, staging, consulting, coaching and praying. Check out her blog at www.activerain.com/results or visit her online at www.michellejudycarr.com or www.lynbrookhighhomes.com. For RE$ult$ ... Just Call ... (408) 252-8900.

 

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Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Michelle. Thanks for the update. I leave these items to accountants and tax attorneys. Enjoy your day!

Apr 19, 2019 05:10 AM #1
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